Slowing money-supply growth in China in November, especially longer term loans, against the backdrop of relatively large total social financing, suggests that China's economic rebound is still primary government led, and risks from shadow banking could emerge in the future, Mizuho economist Shen Jianguang says. "Today's data confirm my worries that the recent growth recovery is mainly driven by government-led infrastructure investment, but the mid-to-long term lending to enterprises has actually dropped," he says, adding that these firms have to finance more through the less-regulated shadow banking system, such as trusts and trust lending, which usually have higher interest rates. China's broadest measure of money supply, M2, rose 13.9% from a year earlier at the end of November, slowing from 14.1% growth at the end of October; total social financing--an alternative measure of credit supply which includes other sources of financing such as bond issuance and trust lending--fell to CNY1.14 trillion in November from CNY1.29 trillion in October.
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